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tv   Nightly Business Report  PBS  February 19, 2013 7:00pm-7:30pm PST

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are fast and furious. there's even an office romance brewing between office depot and office max. all the pairing can be good for shareholders of the acquired firms, not to mention investment bankers, but what does it mean for the broader stock market? floor broker doreen mogavero says it's definitely a vote of confidence for the stock market, but she worries about long-term ramifications for the economy. >> i'm not so sure how much consolidation is actually good because that to me actually means job losses at the administrative level, factory level and even c.e.o. level. so-- i'm not that worried about the c.e.o.s, but still. >> reporter: this year, as m&a activity heats up, stocks have resisted a much talked about correction. the dow, s&p 500 and nasdaq are all up a healthy amount. investment pro sam stovall says
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if the majority of deals are cash, as many have been in 2013, it suggests the m&a cycle is just getting started. >> it's later in the cycle when a lot of m&a activity takes place where it's purchased for stock. then companies are basically saying, "we think our stock is overvalued, let's use it while we can to buy the competition." >> reporter: there may be a lot more corporate marriages in the months ahead, but stovall says the stock market still needs to digest its recent gains. >> i think that we could end up seeing a relatively mild correction in prices, something on the order of 5% or maybe more. but then we're going to see a lot of investors say, "it's time to jump back in because i missed most of this move." >> reporter: stovall also says any stock market correction needs a trigger. what that may be, however, is anyone's guess. suzanne pratt, "n.b.r.," new york. >> tom: dell is among those
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companies involved in the deal- making this year. its founder and a group of investors wants to take dell private. in the meantime, the company reported better than expected quarterly earnings late today. dell earned 40 cents per share last quarter. while that's down considerably from a year ago, it is slightly better than wall street estimates. still, business continues to be tough. the lone business dell saw revenue grow last quarter compared to a year earlier was in its server business, up 18%. the other five-- storage, services, software, mobility and desktop p.c.-- all saw revenue shrink. carr lanphier is an analyst with morningstar. carr, what do you think, on the mend? sustainable? what are your thoughts? >> well, i think dell is really carried by its server and networking business. that was really as a result of its acquisitions. softer, and there have been several acquisitions
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in the last few quarters that drove those revenue gains. i believe networking group, 42%, which led to that growth there. >> tom: that's not that core business that everybody knows about dell, though, the selling of computers, p.c.s, desktops, laptops, and net books. it grew slightly from last quarter, up about 3%, but down 20% from a year ago. the trend is in, and it has done less and less revenue for its core computer business. >> yeah. it's not looking good. when you look at the p.c. business, that might have a little bit of opportunity to really catch something in the commercial business. that's really where dell is focused right now. it got a benefit of $250 million inventor settlements, and it used that to try to aggressively cut prices and target growth opportunities in its mobility and p.c. business. but still, its mobility sales fell 25%, which really didn't look good, due possibly to the bring your own device trend, and there might be a variety
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of reasons. it is not pretty. >> tom: it is not pretty at all, and it is about half of dell's business, based on revenue. michael has offered $13.65 for his company. the stock closed over there, $13.80. does tonight's earnings report change this buyout offer, do you think? >> it is interesting bu in a lot of ways it validates what michael dell is trying to do. the server and networking business is where he sees the future, 42%, 18% year-over-year, as you said. and then you have the mobility side and the p.c. side, which is continuing to erode. so if you kind of have the pallet to suffer through the short-term losses, then you could see some longer-term opportunities. but the real question is: if you were to then shed this hardware side, what are you going to do with this great enterprise business because they were trying to target the commercial hardware business, and sales were continuing to erode there
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because people are bringing in their own devices. so you can't really have an enterprise solution for people's personal devices. it just isn't going to work. you need to be able to hold on to that. >> tom: the company of two sales, the server business and networking business doing well, but it is the traditional business under pressure. what about dell's share price on the stock? do you take a flier on this, carr, thinking that michael dell and others will come up with a higher price or do you move out of the way? >> i think you move out of the way. we have a fair value estimate of $14. we think that's a fair bargain. we don't think it is going to go up because the cost of capital is taking on additional liquidity. >> tom: do you have a position yourself indelibly? >> i do not. >> tom: carr lanphier watching dell with morningstar. >> susie: still ahead on the program tonight, from lance armstrong's doping scandal to olympic runner oscar pistorious' murder charges, does nike do enough to protect shareholders from who promotes its products? harsh words today from president
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obama about budget cuts. he called on congressional republicans to avoid automatic spending cuts, the so-called "sequester" that kicks in on march 1. he said this "meat cleaver approach" will hurt the economy and hundreds of thousands of americans will lose jobs. the president got some backing from budget hawks erskine bowles and alan simpson. they were back in the news today with a new plan to sharply reduce federal spending. darren gersh reports. >> reporter: the president was flanked by emergency responders who'd be hit hard if automatic spending cuts take effect on march 1, and he placed the blame on republicans. >> so far, at least what they've expressed is a preference where they'd rather have these cuts go into effect than close a single tax loophole for the wealthiest americans. not one. >> reporter: as the clock ticks down to the sequester, democrats and republicans are hunkered down for a fight. even so, budget commission co-
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chairs alan simpson and erskine bowles tried to push both sides to talk, calling the automatic spending cuts stupid. but even simpson and bowles are not optimistic. >> they'll go to sequester, and americans will be furious and irritated and disgusted, and they are already. they're disgusted at these people. >> reporter: still, simpson and bowles are urging "these people" to aim higher. they've offered a new plan, calling for an additional $2.4 trillion in deficit reduction. $600 billion from tax increases, the rest from cuts in health care and other government programs and changing the way social security benefits are indexed for inflation. there is plenty in this plan to upset democrats, but erskine bowles says his advice is simple. >> do it. you know, let's get out of our comfort zone, let's make the tough decisions we need to make in order to put our fiscal house in order. we've done the easy stuff, let's do the tough stuff. >> reporter: but conservatives are also unhappy with the latest
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simpson-bowles offer. first, it's a tax increase; and second, it doesn't tackle a projected $7.7 trillion in deficit spending over the next decade. >> and under simpson-bowles, we're talking about another $2.4 trillion reduction. so, we only increase the debt by over $5 trillion. that's part of the problem. they've got a bolder plan, but it's not bold enough. we think you have to get to balance. >> reporter: and that's how far apart democrats and republicans remain. it's not just that they can't agree on specific cuts and tax increases, they can't even agree on the goal. darren gersh, "n.b.r.," washington. >> susie: let's get more analysis from stan collender. he's a former staffer for the budget committees in the house and the senate and now senior partner at qorvis communications in washington. >> susie: so, stan, what do you think of this new simpson bowles plan, is it doable? >> no, it is not doable. democrats and republicans are both equally attacked.
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it never had a chance to begin with. simpson and bowles didn't get their original plan through their own commission. this is just a plea for attention. >> susie: all right, so here we are, down to the wire, and congress isn't even in session and we're coming up on that deadline. you've been through so many of these budget battles on the hill before. so do we get a deal on march 1? >> almost certainly not. the sequester was designed to be the worst possible alternative, as darren said. but what we're discovering it is the best possible alternative, compared to more tax increases, more spending. so there is not a lot of time between now and march 1 to get an agreement on something where no one has moved towards each other at all. it almost certainly goes into effect. the only question is how long is it going to stay into effect. >> susie: we're going to go into that see sequest, seque,
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and we're going to have the automatic spending cuts. and we're still going to have a big budget problem. what happens? >> if it stays in effect, you'll be cutting spending by about $85 billion between now and the end of the fiscal year, september 30th. the problem is a lot of people are going to get, as senator simpson just said, maybe the only thing he said i agree with, a lot of people are going to be pretty angry with these spending cuts. because everybody wants spending cuts, but they don't want a particular spending cult. that's what happened in 1996. and $85 billion in spending cuts, at a time when businesses aren't spending and consumers aren't spending and state and local governments are cutting back, and $86 billion in spending cuts, will push people to be concerned about the economic recovery. that is not the right time to be doing this kind of austerity. >> susie: so what do you see as not only the economic impact, but the wall street impact, and how will rating agencies
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respond to something like that? >> what you need to know, what i think is going to happen, the sequester will hit on march 1. by the time they get to negotiate the continuing resolution, the potential government shutdown at the end of the month, i think everybody will throw up their hands and say let's just stop this sequester. it is the wrong politics, and so the deficit won't be reduced. that, lithe i think will make rating agencies feel a little better because economic growth will feel a little higher. but will make them feel better is if it is combined with a long-term reduction trend. >> susie: i think what people want to know is when do we get things back to normal? what do you have to say about that? >> unfortunately, what i have to say is get used to this because this is the new normal. lurching from crisis to crisis is government from crisis to crisis. there is no big
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comprehensive tax reform or entitlement changes in the offing any time before the next election. so i think we're talking about two more years of contual stomach turning. >> susie: that sounds brutal. thanks, stan, for coming on the program. stan col lestan collender with e qurvis communication. qorvis communication group. >> tom: it may not feel like >> tom: it may not feel like summer, unless you have filled up your gas tank recently. prices at the pump are closing in on last summer's highs. already they're are the highest they've ever been at this time of year.
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ruben ramirez reports. >> reporter: across the country, drivers are feeling the spike in gas prices. >> gas prices went up 11 cents in one day. >> it jumps almost every two days, it seems like. >> reporter: according to, a gallon of regular gas is up 45 cents over the past month to $3.71 a gallon. experts point to a trio of reasons: refineries are not producing at full capacity as they dump the winter fuel from their tanks and refill them with summer blend gasoline; some refineries are closed for maintenance, which is typical this time of year; and, as we began the year, supplies of gasoline were lower. >> there was a lot of concern going on with fiscal cliff and the sequestration and everything like that, so it really kind of put a lot of people on the sidelines, including the oil refiners. so, everybody was kind of in a wait-and-see mode, and now we got through all that pretty unscathed, and now we're getting
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into some increased demand. >> reporter: but the big fear with rising gas prices: money in people's pocketbooks will go to filling the tank and not their shopping cart. >> if we hit $4 a gallon on regular unleaded across the country, that would do a lot of damage. nothing hurts more, more quickly than rising gasoline prices. >> reporter: the first to feel the impact are convenience stores. >> if the consumer has to spend more money on gasoline, they have less money to spend on the stuff that we'd like them to spend inside the store. >> reporter: the other question: if gas prices stay high, will americans spring for summer travel? energy traders remain optimistic. >> the economy is doing a little bit better. there is some potential for people to take more vacations over the summer, and we could see some continued move up or at least firming and support here for energy prices. >> reporter: still, drivers may want to start setting aside a little extra cash now to help cover potentially higher gas prices on the road this summer. ruben ramirez, "n.b.r.," new york. >> susie: also in the energy patch today, transocean closed
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the chapter on the 2010 gulf oil disaster as a u.s. judge approved the company's $1 billion civil spill settlement. transocean owned the rig working b.p.'s macondo well when an explosion killed 11 workers and began the nation's worst offshore oil spill. last week, transocean's $400 million settlement of criminal charges with the federal government was also approved. >> tom: an update on the housing market. confidence among single-family home builders is down slightly this month, the first drop in almost a year. that housing index ticked down a point to 46 for february. anything below 50 shows that more builders see conditions as "poor." despite the drop, confidence among builders is just below its best level since 2006.
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>> susie: apple said today it was the target of hackers, similar to an attack that recently breached facebook. but apple says that while some of its mac computers were infected, there's no evidence that any data was stolen. it will release a new software tool later today to protect customers against the malicious software used in those attacks. tom, this comes as a report in today's "new york times" ties hackers in china for a wide- ranging cyber campaign of attacks on major american companies and the u.s. government. >> tom: increasingly, susie, it's believed those hackers are also targeting u.s. infrastructure targets like pipelines. let's get going with tonight's "market focus."
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the major stock indices resumed their climb, setting aside concerns about government spending cuts threatened in two weeks. the s&p 500 caught a bid from the opening bell with talk about corporate deals and gains in europe. the index rallied 0.7 to finish at a new five and a half year high. 734 million shares traded on the big board, 1.8 billion moved on the nasdaq. the energy and consumer staples sectors powered the sector gains, up at least 1% each. the utility sector had the third best performance today, gaining 0.9%. with oil prices rallying, the energy sector is the best sector so far this year, with all but three of the stocks making up the sector higher today. marathon oil led the group, up 3% to a new 52-week high. conoco-phillips closed up 2.8%, and exxonmobil rose 1%. major health insurance stocks were under selling pressure after the government released its proposal for medicare advantage rates for next year, and those rates were disappointing for major insurers. humana fell 6.4%, universal american was down 4.6%, and united health shed 1.2%.
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the final medicare advantage rates will be announced april 1. meantime, medical device maker medtronic saw its shares fall 2.8%. volume more than doubled with the stock settling at a five- week low. quarterly earnings were slightly better than expected. its core heart and spinal products continues experiencing herbalife reported quarterly results after the closing bell tonight. it's a nutritional supplement company with two hedge fund giants fighting over the company's business model. one calls it a pyramid scheme, the other says it's legit. quarterly results were two cents better than expected. before the results, shares were up 2.6%, adding another 2% to this closing price in extended hours trading. as the company fights back against critics, it raised its financial forecast for the year. it disclosed the securities and exchange commission has requested information on its business. two retail giants are meeting in court this week. j.c. penney and macy's are fighting over martha stewart.
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the two have deals to sell martha stewart merchandise, but macy's claims it has an exclusive deal. the case is just the latest challenge for j.c. penny. with the case beginning, shares were down 1%. penney's has been trying to stick it out in a competitive retail environment, but its shares are half the price they were a year ago. we have a closer look at penney's stock chart. it is on our web site, look for the "blogs" tab where michael kahn has some technical analysis of the stock chart. in a different corner of retail, napa auto parts owner genuine parts fell 3.8% from its all- time high despite better than expected earnings, and auto dealer group 1 was down 7.6% to its lowest price of the year. earrings were much weaker than expected as costs were up sharply. a first for google: a print over $800 per share. today's 1.8% gain takes google over $800 a share to an all-time high. the stock is up 14% already this year. four of the five most actively traded exchange traded products were higher. the s&p 500 volatility note fell 4.3%, moving in the opposite
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direction of the broader market as it usually does. and that's tonight's "market focus." >> susie: wall street's outsized paydays are getting smaller. average bonuses paid to wall street's bankers, traders and support staff in 2012 are down by more than a third, according to a survey from e-financial careers. the drop comes as financial services firms shift their focus to performance. >> the emphasis on risk and controlling risk and compensating people based on the
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risk they take is spreading further and further into the culture of wall street. >> reporter: also cutting into bonuses are more clawback clauses in employment contracts. those allow companies to go after bonuses if certain goals aren't met or violated. the use of those clawback measures jumped from 7% to 13% in 2012. the use of these measurers and the pressure on bonuses could have longer lasting effects in finance. >> you don't have that bonus all coming in cash up front anymore. consequently, base salaries become more important. so, i think, in order to attract talent, firms are going to have to ante up a bit more on the base package than they used to, and that's going to have an impact to cost structures on wall street, as well. >> reporter: those bonuses also are an indicator of the health of the economy. wall streeters use their annual windfalls to buy new homes, cars and stocks-- investments that can give an economic boost to main street, as well.
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>> tom: tomorrow on "n.b.r.," the battle over just where martha stewart can sell her namesake goods. we'll get an update as macy's lawsuit against j.c. penney makes its way to a new york courtroom. tiger woods, lance armstrong, and now the olympic runner and amputee oscar pistorius-- all disgraced athletes, and all were paid big bucks to promote products for nike. in this week's "beyond the scoreboard," rick horrow says nike has an endorsement problem. >> for the second time in four months, nike has had to distance itself from one of its endorsers because of a major international scandal. first, lance armstrong and doping; and now, the disturbing murder charge against south african oscar pistorius, who just last summer became the first amputee to compete in olympic games. nike taking down ads all over africa and the world, and the rumor of an official
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termination; it may be just around the corner. the downfall of lance armstrong and tiger woods and oscar pistorius demonstrates that nike may have trouble vetting its endorsers. but even more troubling is the fact that shareholder value and stock price may be at risk at the speed of a news headline. nike certainly needs to do a better job in vetting its endorsers, but the problem may be in the huge budget it has. $2.4 billion in marketing monies are available for nike to hire anybody they want. they hire world class celebrity endorsers, also some disturbing athletes that may be in their stable, as well. the problem with an athlete with the stature of oscar pistorius is the nike brand value and reputation is at risk even before guilt or innocence is decided. i'm rick horrow. >> susie: and finally tonight, it sounds like a scene out of "oceans 11" or a bond movie. armed men cut their way through a fence at brussels airport this morning and stormed this swiss
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passenger plane loaded with millions of dollars worth of diamonds. they made off with an estimated $50 million in rough diamonds without firing a shot. and tom, police say it could be one of the biggest diamond heists of all time. which means that hollywood can't be too far behind with some kind of movie deal on this. >> tom: find the diamonds and then sell the rights. >> susie: that's "nightly business report" for this tuesday, >> susie: that's "nightly business report" for tuesday, february 19. have a great evening, everyone, and you, too, tom. >> tom: good night, susie. we'll see you online at and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh
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[ ♪music ] >> we live in an electronic -- a world full of technology. turntables, microphones, digital displays, microchips. some artists are driven by the possibilities of manipulating these things. >> walter is bringing together an ancient african approach to instrument building. >> this time on spark, playing with technology. [ ♪music ]
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>> major funding for spark is provided by the william and flora hewlett foundation, supporting creativity and innovation in the arts since 1967. and by the kqed campaign for the future program venture fund with additional support from the walter and elise haas fund the george frederick jewett foundation the marin community foundation the koret foundation the phyllis c. wattis foundation and diane b. wilsey. [ guitar ] >> walter kitundu: the phonocora is a 21-stringed instrument modeled after a west african instrument called the cora. one day i just started building, and about two and a half, three weeks later, i had this big boat of an instrument sitting in my basement. so my challenge, i guess, was to learn how to play it. >> tanzani


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